There have been efforts to ensure that better-off families stop receiving child benefit. George Osborne announced at the 2010 Conservative party conference that child benefit would tapered away from individuals earning over £50,000 and withdrawn at £60,000. But there were problems with that policy which quickly came to light, not least that households with two earners who were on each on, say, £50,000 would keep the benefit in full.

There have been efforts to ensure that better-off families stop receiving child benefit. George Osborne announced at the 2010 Conservative party conference that child benefit would tapered away from individuals earning over £50,000 and withdrawn at £60,000. But there were problems with that policy which quickly came to light, not least that households with two earners who were on each on, say, £50,000 would keep the benefit in full. The Institute for Fiscal Studies showed how inefficient the proposals were in a 2012 report:

170,000 families could increase their net income if an individual in that family managed to lower their pre-tax income; a further 200,000 families could find themselves with a lower net income if their pre-tax income were to rise slightly. It would mean removing Child Benefit from some couples whose joint earnings were £43,000 but not removing it from other couples whose joint earnings were £84,000.

A more sensible option would be to integrate child benefit into the Child Tax Credit:

Combining child benefit with tax credits (or, from October 2013, with universal credit) would allow a more sensible withdrawal against the combined income of a couple, rather than against that of the higher-income individual. Consequently, it would lead smaller losses amongst one-earner couples and lone parents than the government’s proposal.

Once administration costs are taken into account, this measure would save more than £3 billion a year by 2020–21, assuming a consistent rate of increase in costs.

Welcome to the TPA

Welcome to The TaxPayers' Alliance, Britain's grassroots campaigning group dedicated to reforming taxes, cutting spending and protecting taxpayers. If you like what we do, become a supporter now by signing up to our mailing list using the form below. John O'Connell, Chief Executive